Wednesday 21 December 2011

What is the difference between Barriers to entry and Barriers to exit? Give Examples

Entry
Economic, procedural, regulatory, or technological factors that obstruct or restrict entry of new firms into an  market.
  • clear product differentiation
  • necessitating heavy advertising expenditure to introduce new products
  •  economies of scale --> necessitating heavy investment in large plants to achieve competitive pricing 
  • restricted access to distribution channels
  • collusion on pricing
  • well established brands
  • fierce competition.
Exit

 Legal restrictions placed on the right of certain industries (or on industries in certain localities) to close down their operations and redeploy their resources in more fruitful ventures. 
  • loans
  • debts
  • owed products to consumers
  • contracts with suppliers

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